Crypto 101

CRYPTO 101: What is a Masternode?

A masternode is a cryptocurrency wallet also referred to as a full node that contains a copy of the ledger in real-time. Blockchains can be broken down into three types: Proof of work, proof of stake, and a mixture of the two.

The blockchains need a system to process transactions that enables the blockchain to function. But masternodes are different than the functionality of regular nodes.

They go above and beyond in the functionality compared to a node that relays blocks and transactions. Some of the features that made up masternodes include:

  • providing a treasury system for crypto
  • keeping transactions private
  • enabling instantaneous transactions
  • enabling governance and voting Masternodes is referred to in short form as MN, and
  • they are not standalone.
  • They are always in contact with other nodes which make up the decentralized network.

Organizing a Masternode

Masternodes are great for they provide the benefit of earning guaranteed coins with the potential upside of the coin value. Masternodes can be run by anyone; however, there are barriers to entry that have been put in place to prevent fraud or wrong-doings.

The first requirement is to put up collateral – with this, the operators are forced to have a direct stake, it can be lost if ever cheating occurs. It serves as a self-policing measure that keeps fraud to a minimum.

Also, to run a masternode, a user should include their VPS or dedicated server, a dedicated IP address, and enough storage space for saving the blockchain ledger.

Masternodes are very beneficial for crypto investors for they are an on-going revenue source, then earning them interest on their investment.

How to run a masternode?

This varies depending on the currency, but this is a basic checklist one can use as a guide and must be followed to some extent regardless of which currency is selected:

  1. Buy the number of coins you need for collateral (be sure to buy a little extra to cover transactions fees)
  2. Install the wallet on your server
  3. Send your coins or tokens to your wallet
  4. Setup a node address in your wallet and transfer the coins to the node
  5. Setup the node.
  6. Once configured, you’re ready to start the server. At this point, you’ll need the node daemon.
  7. You’re ready to rock and roll and begin earning coins off your masternode!
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